How Investing In Women Entrepreneurs Can Be A Surefire Way To Good ROI

What if you could deliver a relatively good return on investment, without much risk, have relatively good liquidity and deliver a social impact? Sound far fetched? Not to Catherine (Cat) Berman, Co-founder of CNote, an investment vehicle for savers who want a good ROI.

Berman is a successful serial entrepreneur. “I love building scalable businesses that solve an underlying social issue,” she said. Her expertise includes microfinance, gender equality and economic empowerment. Berman also was a managing director at Charles Schwab and senior vice president at Astia ‒ a nonprofit that identifies and propels high-potential women-led companies with expertise and money.

The problem

Access to capital is crucial to start-up and growing companies. Undercapitalized companies have lower sales, lower profits and generate fewer jobs. There's no doubt about it women face more challenges raising money for their companies than their male counterparts. As a result they raise less capital for their companies, resulting in much smaller companies. Women have nearly caught up to men in terms of the number of businesses they own: owning 50% or more of 45% of all private companies, according to the National Women’s Business Council. But their average revenues are only $203,000 compared to $609,000 for male-owned businesses.

The Solution

Interest in women entrepreneurs is growing among women. Women identify with the greater challenges that women face as business owners raising funding for their companies. As a result, women are becoming funders as:

“Women are sitting on $500 billion in uninvested assets,” Berman said. It got her thinking. Women are frustrated by the low interest rates they receive on their savings accounts and CDs. Was there a failsafe investment vehicle with a decent ROI and the ability to withdraw money when needed, thought Berman?

Yes, by combining long-established social investment options with new regulations.

For years the United States government, commercial banks, foundations and faith-based organizations have been getting a steady return by investing in Community Development Financial Institutions (CDFI). The mission of CDFIs is to lend money to small businesses, such as women- and minority-owned businesses, that commercial banks deem risky. CDFIs support their borrowers with training and technical assistance to ensure their success, making them a long-established social investment option.

The newly enacted JOBS Act opened investing to a whole new audience. Prior to the JOBS Act, fundraising from the general public was the exclusive domain of larger companies that could afford to spend the millions of dollars it takes to become listed on stock exchanges, like the NYSE and NASDAQ. The JOBS Act enables companies to raise small amounts of money from you and me. Berman realized she could raise money from individual investors through the JOBS Act and invest the money in CDFIs that fund women- and minority-owned businesses.

To start, CNote is only offering accredited investors – wealthy people – the opportunity to invest. It can do this through Title II of the JOBS Act. Within a month after launching its crowdfunding campaign, CNote received $2 million in commitments. However, sometime next year, through Title IV of the JOBS Act, aka Reg A, CNote intends to offer mainstream investors the ability to invest.

Interestingly, Berman’s research found that, for investors, the most compelling aspect of CNote is that it offers a high-yield savings option – 3% to 5%. Savers can withdraw money on a quarterly or annual cycle. Investing in women- and minority-owned businesses was the icing on the cake for investors.